Helping the poor (and everyone else) burn dirty coal

Bruce Wark’s defense of the NDP subsidy on dirty, coal-fired electricity as a way to help the poor drew fire from several readers. In a minute, one reader corrects a factual error that tripped up both Wark and Contrarian. But what most objected to what is we might call The Wark Principle:

You don’t tax necessities, then ask poor people to apply for rebates. That’s why we don’t tax groceries. How is electricity any different?

Contrarian reader Martin MacKinnon thinks Wark’s objection to taxing necessities is ill-considered:

There are indeed far too many Nova Scotians who can ill afford the necessities of life. However, why should the rest of us benefit from their poverty? Wark seems to miss an important point. If those of us (including Wark and I) who could well afford to, do not pay tax on power, then governments who need to pay for things like health care and education will have to collect those taxes elsewhere. We need tax breaks for the necessities of life to be targeted at those who need help, not at the rest of us who don’t.

After the jump, a more vehement reader, and a factual correction.

Jonathan Dursi is less tactful:

Wark wrote: “You’re forgetting about an important and well-established principle. Governments should not tax necessities.” Well, that’s a pretty crap principle, isn’t it?

The problem the poor and disadvantaged have is not that heating oil is taxed; it’s that they’re poor.  And disadvantaged. You approach that problem by giving those people money, and training, and other opportunities to re-advantage themselves—not by screwing up your energy, transportation, and climate policies to try to bend them into anti-poverty policies.

Good principles would be:

  • We’ll help the poor and disadvantaged live in dignity and have opportunities to better their lot; and
  • We’ll work toward policies that reduce our carbon emissions and other pollutants.

A principle of  let’s make fossil fuels as cheap as possible, so everyone can afford as much as they want helps only tiny amounts on one policy front, while actively undermining the other.

Unfortunately, this principle is held, genuinely or otherwise, by lots of well meaning people.   No one wants to see families who are already struggling to make ends meet have a hard time heating their home in the winter.  And political parties who fight to keep prices low for those unlucky few get to be the hero and reap the rewards by also giving their middle- and upper-middle class constituents the same stuff for cheap.

But that inevitably leads to both underinvestment in whatever you’re giving away, since there’s now no revenue stream for it, and overuse and wasteful use, since it’s cheap and plentiful.   Most big Canadian cities have power systems, water distribution systems, and transportation systems that are crumbling because of exactly this “principle.”

Charge what needs to be charged for goods and services; tax what needs to be taxed.  Canadian families with low incomes need income, not bad policy.

Finally, a reader complains that both Wark and Contrarian have mischaracterized the tax relief for home electricity. Quoting Wark:

Under NDP pressure, the Tories removed the provincial sales taxes on all home heating fuels. But later, they restored the tax on electricity.

The reader points out:

This is in fact incorrect, but rarely acknowleged, even by the Contrarian.  Electricity deemed to be used for home heating (time of year, more than 27.4 kwh per day) did not carry the provincial portion of the HST.

From the Access Nova Scotia web site: “Until September 30, 2009, only electricity that exceeded a threshold of 27.4 kilowatt hours per day times the number of days before October 1, 2009 on the bill is eligible for the rebate. The base charge was not eligible for the rebate”

The debate over the “subsidy” applies to the portion that was taxed, i.e. all use during summer (hot-tubs) and the portion below 27.4 kw-h per day.

Note that the base charge is not being rebated by the new government, therefore the maximum theoretical household benefit under the NDP plan is 27.4 kwh times $0.11796/kwh times 0.08 times 30 (days) = $7.76 per month. Not many folks without hot-tubs would hit 27.4 kw-h per day in the summer, thus lowering the average rebate during that period.

It is also forgotten that the NDP election promise was to “remove HST from home energy”.  HST is 13%, not 8%.  If energy is an essential service like groceries, then it would carry the same tax exemption/rebate (13% HST, not 8% provincial component of HST).